Business Rates

Business Rates

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Just a quick one and was looking to your thoughts.

We have client who owns their own premises, a two floored building.  As a whole, the building is quite expensive from a business rates point of view.  The client has therefore started a new limited company (he is a mortgage broker) for upstairs for the mortgage advisors , let say B limited while downstairs, the admin people work for the original business - 'A' limited. 

B Limited rent the 'upstairs' from A limited for a nominal amount (rent agreements etc have been set up) and as each floor is independently below the required squared footage, no business rates have been applied.

My thinking is, could this be applied to our offices here? so my question is has anyone here done anything similar or know of any ways in which to reduce the business rates liability.

Thank in advance!

Replies (4)

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By FCExtraordinaire
13th Aug 2014 10:05

New business relief

I guess you  have seen

https://www.gov.uk/apply-for-business-rate-relief/enterprise-zones

Might have worked round it by being in an enterprise area ?     Can't be retail as Financial Services do not qualify.   Having worked in Financial services,  my guess is that they are separating the sales from mortgage commissions to the other by-products that they sell such as life insurances/income protection  which is very admin based etc,  making it two 'separate'  businesses.

Would it work ? I would check the theory with the local council to avoid a huge bill because of some decision makers error.

And why don't you ask them as I am presuming you would account for both A Ltd and B Ltd and so would have to have the client background. 

 

 

 

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paddle steamer
By DJKL
13th Aug 2014 10:40

There are risks re Statutory Repairs

 

I work for a property company and often we will have different parts of a building rated as distinct units, usually to accommodate different tenants in occupation for each part. If the assessor is happy the parts are distinct he will rate them as such.

If the leases/licences we grant are internal repairing then if the building then has a statutory repair the Council will bill us a share for each distinct rateable unit and with IRI lease we cannot recover from the occupiers.

So if say, at outset, we have the top floor of a building and A N other has the ground floor then for a statutory repair each would be billed half by the Council. If our top floor is then split into say four units then if a statutory repair Council will bill us 4/5 and A N other 1/5.

Of course what the Council bills does not change our title obligation, if the titles say we are liable for 50% of the building then legally that is our obligation. However the problem becomes one of collection of our overpayment from the ground floor owner, this is our problem and we have to cashflow such a position until we can make recovery.

Accordingly I would take into account the type/ age of property I was considering splitting for rates purposes, sometimes cunning plans backfire.

 

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By Maslins
13th Aug 2014 11:11

Small business rates relief?

I'm guessing the OP is surrounding small business rates relief?

If so, "splitting" a property into multiple units, where each is used by a different entity does seem to be common.  Where one person has set up two separate entities purely to exploit this, I don't know whether there is any anti-avoidance measures to prevent it.

However, it doesn't seem a great "solution" to me.  If it's two floors, and on their own both are presumably sub £6k to be rates-free, then the total liability if it was just one rateable unit would hardly be massive.  Why go to all the hassle of having two separate companies, two sets of books/accounts, recharges between them, potential associated company issues and no doubt plenty of other as yet unconsidered knock on impacts just to save a few quid in rates?

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By ireallyshouldknowthisbut
13th Aug 2014 11:18

.

Dont overlook the rateable value for two floors assessed individually, will be higher than the combined unit.

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